Court of Appeals of Illinois, First District, First Division
MICHAEL W. UNDERWOOD, JOSEPH M. VUICH, RAYMOND SCACCHITTI, ROBERT McNULTY, JOHN E. DORN, WILLIAM J. SELKE, JANIECE R. ARCHER, DENNIS MUSHOL, RICHARD AGUINAGA, JAMES SANDOW, CATHERINE A. SANDOW, MARIE JOHNSTON, and 338 other Named Plaintiffs listed, Plaintiffs-Appellants,
CITY OF CHICAGO, a Municipal Corporation, Defendant, and TRUSTEES OF THE POLICEMEN'S ANNUITY AND BENEFIT FUND OF CHICAGO; TRUSTEES OF THE FIREMEN'S ANNUITY AND BENEFIT FUND OF CHICAGO; TRUSTEES OF THE MUNICIPAL EMPLOYEES' ANNUITY AND BENEFIT FUND OF CHICAGO; and TRUSTEES OF THE LABORERS & RETIREMENT BOARD EMPLOYEES' ANNUITY & BENEFIT FUND OF CHICAGO, et al., Defendants-Appellees .
from the Circuit Court of Cook County. No. 13 CH 17450
Honorable Neil H. Cohen Judge Presiding
JUSTICE SIMON delivered the judgment of the court, with
opinion. Presiding Justice Connors and Justice Harris
concurred in the judgment and opinion.
This case is back before the court following another round of
rulings by the circuit court concerning plaintiffs'
rights to healthcare coverage. Plaintiffs are multiple
categories of City of Chicago retirees who have participated
in the City's medical benefits plan and received some
level of healthcare coverage from the City over the years.
The City has undertaken to eliminate the healthcare benefits
that many of the plaintiffs previously enjoyed; while the
plaintiffs have fought to retain the benefits under a number
of legal and equitable principles. The circuit court largely
ruled in favor of the City and dismissed most of the
plaintiffs' claims. We affirm in part, reverse in part,
and remand the case for further proceedings.
3 The genesis of this case dates all the way back to the
1960s, but most of the relevant events occurred between 1983
and the present. The City has long been providing fixed-rate
subsidized healthcare to its retirees through the City of
Chicago Annuitant Medical Benefits Plan. In 1983, the City
agreed to provide a subsidy for the Police and Firefighter
funds for a healthcare benefit. Under that plan, the
respective annuity and benefit funds (the Funds) would
provide a subsidy to the City to cover a set amount of the
participants' healthcare ($55 per month for
non-Medicare-eligible retirees and $21 per month for
Medicare-eligible retirees). Ill. Rev. Stat. 1983, Ch.
108-1/2, par. 8-167.5 (eff. Jan.12, 1983). The contributions
themselves were funded by a City tax. The municipal employees
and the laborers and retirement board employees were brought
under the same construct as the police and firefighters in
1985, just at a smaller average subsidy ($25 per month). Ill.
Rev. Stat. 1985, Ch. 108-1/2, par. 11-160.1 (eff. Aug.16,
4 In 1987, the City began its quest to stop subsidizing
retiree healthcare. The City notified the Funds that it would
stop providing healthcare benefits on the first day of 1988,
and it filed suit in the circuit court of Cook County
(City of Chicago v. Korshak, No. 87 CH 10134 (Cir.
Ct. Cook Cty.)) seeking a declaration that it had no
obligation to continue providing coverage. The Funds
counterclaimed seeking a declaration that the City was
required to continue covering healthcare costs. A group of
retirees intervened and were certified as the "Korshak
subclass." The Korshak subclass is comprised of
individuals that retired on or before December 31, 1987. The
"Window subclass" was certified later and is
comprised of employees that retired after December 31, 1987,
but before August 23, 1989. The retirees counterclaimed
seeking a declaration that they were entitled to lifetime
5 Before that case was adjudicated on the merits, the City
and the Funds settled. The individual retirees were not
parties to the settlement. The settlement, which was adopted
legislatively as part of the Pension Code (40 ILCS 5/5-167.5
(as amended by P.A. 86-273, § 1, eff. Aug. 23, 1989)),
amended the 1983 and 1985 fixed-rate subsidy statutes to set
forth the City's new obligations. The amendment stated
that for the period from 1988 through the end of 1997, the
Funds would continue to pay a subsidy and the City was also
responsible for 50% of the retirees' healthcare coverage
costs. The parties agreed to "negotiate in good faith
toward achieving a permanent resolution of this dispute"
until the end of the settlement period and that
"[f]ailing agreement, the parties shall be restored to
the same legal status which existed as of October 19, 1987
***." The amendment to the Pension Code explicitly
stipulated that the obligations set forth therein "shall
terminate on December 31, 1997." 40 ILCS 5/5-167.5 (d)
(as amended by P.A. 86-273, § 1, eff. Aug. 23, 1989).
The trial court in that Korshak case did not address
the individual participants' claim for permanent coverage
and imposed the settlement agreement on them.
6 When no permanent solution was reached by 1997, the City
again sought to end its coverage obligations altogether. The
case ended up before this court where we held that
"under the express terms of the settlement agreement,
the [retirees] are entitled to reargue the claims originally
asserted" in the 1987 case. Ryan v. City of
Chicago, No. 98-3465, at p. 7 (Rule 23 Order June 15,
2000). Again before the claims were adjudicated on the
merits, the parties settled. After settlement extensions and
corresponding amendments to the Pension Code in 1997, 2002,
and 2003 (P.A. 90-32, § 5, eff. June 27, 1997; P.A.
92-599, § 10, eff. June 28, 2002; P.A. 93-42, § 5,
eff. July 1, 2003), all of which were substantially similar
to the first settlement and all with the same limiting
language and expirations, the City conveyed its intent to end
healthcare benefits for retirees once and for all.
7 In the 2003 agreement, the parties agreed that, at the
expiration of that agreement, "the City may offer
additional healthcare plans at its own discretion and may
modify, amend, or terminate any of such additional healthcare
plans at its sole discretion." The agreement created the
Retiree Health Care Benefits Commission ("RHBC")
that would make recommendations concerning the state of
retiree health care benefits, the costs of those benefits,
and issues affecting the retirees' benefits to be offered
after July 1, 2013. The 2003 agreement was set to expire in
2013. Before the agreement expired, the City notified
retirees that, on the recommendation of the RHBC, once the
agreement expired in 2013, the City was going to begin to
reduce healthcare benefits until January 2017, at which time
the City would end the plan in its entirety. Certain classes
of employees, like those in the Korshak and Window
subclasses, would retain healthcare benefits under the
City's new plan but others, particularly those hired
after 1989, would not.
8 Plaintiffs attempted to revive the 1987 lawsuit in the
circuit court of Cook County, but the court ordered them to
interpose their claims in a newly-filed complaint (this
case). Once the new case was filed, the City removed it to
federal court. After the federal district court dismissed the
retirees' claims (Underwood v. City of Chicago,
No. 13 C 5687, 2013 WL 6578777, at *17 (N.D. Ill.Dec. 13,
2013)), the United States Court of Appeals for the Seventh
Circuit affirmed the dismissal of the federal claims, but
remanded the matter to state court for a resolution of the
"novel issues of state law." Underwood v. City
of Chicago, 779 F.3d 461, 465 (7th Cir. 2015).
9 Back in state court, the City filed a motion to dismiss.
The plaintiffs' third amended complaint has claims for:
improper diminution of pension benefits under the Illinois
Constitution (count I), breach of contract (count II),
estoppel (count III), impairment of contract (count V), and
equal protection and special legislation challenges to the
City's plan of action (counts VI and VII). The parties and
the courts have discussed the retirees as broken down into
four subclasses: (1) the Korshak subclass, made up of people
who retired before December 31, 1987; (2) the Window
subclass, made up of people who retired between January 1,
1988 and August 23, 1989; (3) subclass three, made up of
people who retired on or after August 23, 1989; and (4)
subclass four, made up of people who were hired after August
10 While the motion to dismiss was still pending and before
the trial court entered a judgment on the merits of
plaintiffs' claims, plaintiffs filed a motion for a
preliminary injunction. The trial court denied the
sought-after injunctive relief. Plaintiffs appealed that
ruling and, after examining plaintiffs' claims insofar as
they related to preliminary injunctive relief, we affirmed.
Underwood v. City of Chicago, 2016 IL App (1st)
153613, ¶ 32 (appeal denied, No. 121498, 2017 WL 603503
(Ill. Jan. 25, 2017)).
11 In resolving the motions to dismiss, the trial court held
that plaintiffs could not state a claim on the 1987, 1997, or
2003 amendments under the Illinois Constitution's pension
protection clause because the settlements on which the claims
are based provided only time-limited benefits. The trial
court did, however, hold that the members of the Korshak
subclass, the Window subclass, and subclass three could state
a claim based on the 1983 and 1985 amendments that did not
contain the same limiting language that the subsequent
amendments did. The trial court dismissed the remaining
claims, denied the plaintiffs' motion for class
certification, and made a finding that there was no just
reason to delay appeal of its judgment on the claims it
dismissed (See Ill. S.Ct. R. 304(a)). The retirees later
filed a renewed motion for a preliminary injunction, which
the trial court also denied.
12 The case is now before the court on an interlocutory
appeal principally concerning the propriety of the trial
court's ruling on motions to dismiss filed by the City
and the Funds. The retirees' renewed request for
injunctive relief is also part of their appeal.
14 The trial court dismissed the retirees' claims under
section 2-615 of the Illinois Code of Civil Procedure. A
section 2-615 motion to dismiss attacks the sufficiency of a
complaint and raises the question of whether a complaint
states a cause of action upon which relief can be granted.
735 ILCS 5/2-615 (West 2012); Fox v. Seiden, 382
Ill.App.3d 288, 294 (2008). All well-pleaded facts must be
taken as true, and any inferences should be drawn in favor of
the nonmovant. Jones v. Brown-Marino, 2017 IL App
(1st) 152852, ¶ 19. A section 2-615 motion to dismiss
should not be granted unless no set of facts could be proved
that would entitle the plaintiff to relief. Id. We
review the dismissal of a plaintiff's claims de novo.
Sandholm v. Kuecker, 2012 IL 111443, ¶ 55.
15 I. Claims Under the Pension Protection Clause (Count I)
16 The pension protection clause of the Illinois Constitution
has been the focus of considerable public attention recently.
As the State, cities, and other public employers attempt to
rein in their pension obligations and workers and retirees
attempt to secure all the benefits they have been promised,
many of the disputes have made their way through our courts.
The decisive legal mechanism in many of these cases has been
the pension protection clause. See, e.g., In re
Pension Reform Litigation, 2015 IL 118585, ¶ 89.
17 The pension protection clause of the Illinois Constitution
states that "[m]embership in any pension or retirement
system of the State, any unit of local government or school
district, or any agency or instrumentality thereof, shall be
an enforceable contractual relationship, the benefits of
which shall not be diminished or impaired." Ill. Const.
1970, art. XIII, § 5. The pension protection clause is
intended to eliminate the uncertainty that surrounded public
pension benefits (People ex rel., Sklodowski v.
State, 182 Ill.2d 220, 228 (1998)) and to provide public
employees with a basic protection against the complete
abolition of their rights or the reduction of their benefits
after they have already embarked upon employment (Miller
v. Retirement Board of Policemen's Annuity, 329
Ill.App.3d 589, 597 (2001)).
18 A. Claims Based on the 1997, 2002, and 2003 Settlements
19 The retirees argue that they are entitled to
"lifetime healthcare coverage" "for each
annuitant class, as it best was during their
participation." For that to be the case, we would have
to find that the Illinois Constitution's pension
protection clause (Ill. Const. 1970, art. XIII, § 5)
protected the benefit levels in the 1997, 2002, and 2003
amendments for life for any member of any subclass that
participated in the plan while the particular amendment was
in effect. The retirees' argument for permanent coverage
on these terms has a significant emphasis on the Illinois
Constitution's pension protection clause (Ill. Const.
1970, art. XIII, § 5) and the Illinois Supreme
Court's decision in Kanerva v. Weems, 2014 IL
115811, so we begin there. However, we find that neither the
Illinois Constitution nor the Kanerva decision
extend the settlements' benefit levels to retirees beyond
the temporal scope of those agreements.
20 The Illinois Supreme Court has interpreted the pension
protection clause to protect not only the retirement annuity
itself from diminution, but instead has held that all of the
benefits flowing from one's participation in a public
pension system are constitutionally protected. Kanerva v.
Weems, 2014 IL 115811, ...